Reforms entice new healthcare players

The lucrative Vietnamese healthcare sector is on the radar of foreign investors

According to a VIR source, a group of South Korean companies are seeking co-operation with pharmaceutical companies in Vietnam to enter the healthcare market.

Boasting high growth potential buoyed by a growing and aging population, rising per capita income, and increasing awareness of foreign-branded drugs, the lucrative Vietnamese healthcare market is also on the radar of investors from the European Union, the United States, Japan, and Singapore.

Potential funders have been making preparations to benefit from new free trade agreements (FTAs) by opening representative branches or looking for partners in Vietnam.

According to the European Chamber of Commerce in Vietnam (EuroCham), the EU-Vietnam Free Trade Agreement (EVFTA) means that Vietnam has gone further than World Trade Organization (WTO) terms on market access for EU service providers, thus making the country an attractive destination to EU investors.

“As a fast-growing ASEAN economy, Vietnam holds substantial potential for international companies. The EVFTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are therefore widely celebrated by the pharmaceutical industry as it supports fair and equal access to the market. Thanks to these agreements and Vietnam’s regulations, foreign companies are establishing legal entities and can become long-term partners here, therefore we expect robust future growth,” ­EuroCham’s PharmaGroup told VIR.

Industry insiders forecast that together with the FTAs, positive changes in legislative reforms are expected to brighten the picture of foreign investment in the sector.

Decree No.155/2018/ND-CP and Decree No.169/2018/ND-CP are the two long-waited new orders recently issued by the Ministry of Health (MoH), reflecting positive amendment on pharmaceuticals and cosmetics business conditions in the controversial Decree No.54/2017/ND-CP, cutting a number of procedures in pharmaceuticals imports, clinical records of proposed imported drugs and drug registration.

Thus far, in moves to make long-term profit amid mounting competition, international healthcare and pharmaceutical firms have created a focus towards innovative life sciences in Vietnam.

However they will have to wait as till now the MoH is still working on a circular guiding the development of public private partnership (PPP) project in the sector.

Additionally there are other legal barriers that hinder their next steps, including issues related to intellectual property rights, reimbursement process drug registration and others.

At a while some internationally-invested players are putting focus on increasing their manufacturing output in Vietnam to reap tax incentives. Said to be among the leaders of this movement are US-headquartered MSD Group, Nipro Pharma Vietnam, and B.Braun, Germany’s largest pharmaceuticals and medical equipment producer.

Alongside overseas players in a rush to prepare for the new period, more domestic firms are also joining the race to cash in on unmet needs in the home country, where the pharmaceutical market’s turnover is expected to continue double-digit growth over the next five years.

Several days ago Prime Minister Nguyen Xuan Phuc pressed the button to kick off construction of the 1,000-bed International General Hospital, with investment of over VND3.7 trillion ($160.9 million) by private-run property conglomerate FLC Group. The project marked the official entry of FLC into the healthcare sector, with another ambition to develop a hi-tech healthcare and pharmaceutical park in the northern province of Quang Ninh.

The venture makes it the second Vietnamese property developer to penetrate into the sector, following Vingroup. Vingroup is now expanding rapidly in the country with a network of Vinmec hospitals.

Industry insiders said that growth of Vietnam’s drug spending per capita, which typically expanded 10.6 per cent on-year to an estimated $53.54 in 2018, has prompted more private Vietnamese corporations to dip into the sector, thus heating up competition in the market.

Last year the market also witnessed newcomers including electronics giants Digiworld JSC and Nguyen Kim. There are calls for ­private investment in developing satellite hospitals to ease overloads at central ones, and its new foreign investment attraction strategy to ­prioritise hi-tech healthcare in the future.

The room for private healthcare development remains vast when the country’s total spending on healthcare makes up 5.8 per cent of GDP, making it the highest rate in the region and forecast to keep stable over the next 20 years, the World Bank said in their Vietnam 2035 report. Furthermore, private-run healthcare in Vietnam accounts for just 5.4 per cent, while the threshold in the United Kingdom is 10 per cent, Thailand 24 per cent, and India 93 per cent.